Sixth Circuit adopts “reasonable diligence” standard for FLSA cases.

On May 19, 2016, the Sixth Circuit expressly adopted the “reasonable diligence” standard for Fair Labor Standards Act cases. This means that employers must exercise “reasonable diligence” in determining whether employees are working overtime hours (and, thus, must be paid for those hours). The case is Craig v. Bridges Bros. Trucking LLC.

In the case, I, along with my co-counsel Laren Knoll, represented a bookkeeper employee in a wage and hour dispute with her employer. The undisputed facts relevant to the Sixth Circuit opinion are:

  1. The bookkeeper worked overtime hours.
  2. She recorded those hours on her employers’ timesheets.
  3. She noted on the timesheets either a “straight time” rate for the overtime hours or a “no charge” if she worked at home for those hours.
  4. She handed in those timesheets (along with the other employees’ sheets) each week to the company’s owner for approval.
  5. She was not paid overtime wages.
  6. She was not exempt from the Fair Labor Standards Act’s overtime pay requirements.

The employer raised two defenses to paying the bookkeeper’s overtime wages:

First, the employer claimed that the owner never actually looked at the timesheets so didn’t “know” the bookkeeper was working overtime hours. Under the FLSA, an employer has to either know or “have reason to know” an employee is working overtime hours in order for the hours to count under the FLSA’s overtime requirements.

Second, the employer claimed that the bookkeeper failed to follow the “reasonable time reporting procedure” by not recording an overtime rate on her timesheets. Under Sixth Circuit precedent, if an employee doesn’t follow a time reporting procedure, they may be barred from seeking overtime hours.

I argued what should be common sense: an employer “has reason to know” what’s on its own payroll records. Moreover, the bookkeeper did follow the time reporting procedure and, even if she didn’t, the employer still had reason to know that she was working overtime.

The Southern District of Ohio federal court granted summary judgment in favor of the employer. In part, the trial court seemed to hold that, because the bookkeeper miscalculated her pay rate (as straight time or “no charge” instead of overtime), she didn’t follow the “reasonable time keeping procedure.” As a result, the employer was completely off the hook for the wages.

The Sixth Circuit reversed the Southern District in a decision with some important implications for other wage and hour cases.

First, the Sixth Circuit held that, even if the bookkeeper miscalculated (even intentionally) her pay rate, it is not a bar to recovering overtime wages. See pages 6-7 of the Decision. If it was a bar, then employees could waive their rights to FLSA-mandated wages, which the U.S. Supreme Court has held employees may not do.

Second, the Sixth Circuit expressly adopted, for the first time, the “reasonable diligence” standard for FLSA cases. See pages 7-8 of the Decision. Prior to this case, it was unclear whether the Sixth Circuit actually required employers to exercise reasonable diligence in determining whether employees were working overtime. Other Circuits have adopted that standard, and a reasonable diligence requirement is common sense, but common sense doesn’t always win the day. Here it did.

Third, the Sixth Circuit expressly recognized two exceptions from the prior White v. Baptist Mem’l Health Care Corp case (White held that employees cannot recover overtime wages unless they comply with employers’ reasonable time keeping procedures). The exceptions are (1) if an employer prevents employees from reporting overtime and (2) if the employer is “otherwise notified” of an employees’ unreported work. See page 9 of the Decision. Again, this is just common sense.

Fourth, the Sixth Circuit was not willing to go so far as to grant summary judgment in favor of the bookkeeper based on the timesheets alone. We argued that, as a matter of law, reasonable diligence requires employers to know what’s on their own timesheets. The Court disagreed and ruled that it is a fact question for a jury.

Overall, it was a great decision for employees, and I am glad that I got to argue it before the Sixth Circuit. You can listen to the argument here.

[On a side note, on the day of the oral argument, there was a bomb scare at the courthouse. We were scheduled for an early morning argument, but security prevented us from entering the courthouse because of the scare. Throughout the morning, Laren and I did not know whether I would get to argue that day or if the arguments would be cancelled (and the case just decided on the briefs) or rescheduled. Ultimately, we were able to enter the courthouse around 1:30, and I got to argue then.

I was really impressed that our panel of Judges Griffin, Kethledge (who is apparently on Donald Trump’s short list for a Supreme Court appointment), and Cleland did not try to rush the arguments. I was worried that, after an all-morning delay, the judges would try to speed through the arguments. That wasn’t the case at all. All three judges seemed to carefully listen to the arguments and asked thoughtful questions.]

For more information, contact Andy Biller, Of Counsel to Markovits, Stock & DeMarco and author of Wage and Hour Information Resource; (614) 604-8759.

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